Health Clubs Industry Perceptual Map
Health Clubs Industry Perceptual Map
The Health Clubs Industry is highly segmented and was estimated to be roughly $27.2 billion in size for 2016.[1] The barriers to entry are minimal and growth has been attained primarily through consolidation and franchising.[2] [3] While there are some key players in this industry, it mainly comprises of local and boutique fitness centers.
The following perceptual map focuses on six of the largest multi-purpose gyms which include the following: LA Fitness ($1.98 Billion); Life Time Fitness ($1.48 Billion); 24 Hour Fitness ($ 1.42 Billion) Equinox Holdings ($1 Billion); Planet Fitness ($378 Million).[4] The profile range of these companies range from low-cost (Planet Fitness) to midmarket (LA Fitness, 24 Hour Fitness) to luxury (Equinox, Life Time Fitness). Health Clubs that are considered low-cost do not offer much beyond strength training and cardio equipment, while the luxury health clubs offer spas, cafes and juice bars, amongst other amenities.
In order to compare pricing, I looked at the first-year annual average of fees for the basic single membership package offered by the following health clubs.[5] In regards to quality, I took the average of five factors on a 1-5 scale from a recent survey conducted by J.D. Power.[6] I then multiplied those numbers by two, because I like ten-point scales better. Their market share is based on their revenue portion of the $27.6 billion industry total.
Analysis of Map and
The perceptual map indicates that there is a correlation between membership fees relative to the quality of amenities offered. The outlier appears to be Planet Fitness though, as they have been able to match quality with low price. This would probably explain why the company has expanded exponentially relative to the rest of the industry. Of it’s 1300 franchise gyms, more than half have opened in the past four years.[7]
The map also seems to indicate that there are three primary areas of growth. First, with the recent exponential growth of Planet Fitness, the franchise model, low-cost model seems to be a major industry disruptor. Second, LA fitness and 24 Hour Fitness appear to be growing through consolidation as both are backed by private equity. [8] [9] While LA Fitness offers the lowest quality of amenities, they are still the largest player due to consolidation. This also likely explains why the quality of their equipment and facility is low due to the fact that much of their equipment would be older or depreciated in value. Third, luxury clubs are growing as well as they appeal to the consumer segment seeking exclusivity and the best quality.
LA Fitness and 24 Hour Fitness should figure out how to offer higher quality and/or lower priced services as it appears that the lower cost players like Planet Fitness are acquiring the average fitness center user. And the users looking for premium quality are willing to pay a substantial more annually for the best amenities. While they can maintain growth through acquisition, the future of the industry appears elsewhere.
[1] https://www.statista.com/statistics/236120/us-fitness-center-revenue/
[3] https://www.entrepreneur.com/article/299678
[4] http://www.clubindustry.com/awards-rankings/club-industrys-top-100-health-clubs-2017
[5] https://www.gymmembershipfees.com/
[6] http://www.jdpower.com/ratings/study/Fitness-Centers-Study/2293ENG
[8] http://www.sepfunds.com/Partner-Companies/la-fitness.html
[9] https://www.bizjournals.com/sanfrancisco/news/2014/05/30/24-hour-fitness-sold-to-private-equity-pension.html
Comments
Post a Comment